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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchangce Act of 1934
Date of Report (Date of earliest event reported): June 19, 1997
--------------------------
VENCOR, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10989 61-1055020
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
3300 Providian Center
400 West Market Street
Louisville, KY 40202
(Address of principal executive offices) (ZIP CODE)
Registrant's telephone number, including area code: (502) 596-7300
Not applicable
(Former name or former address, if changed since last report)
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<PAGE>
The undersigned Registrant (or the "Company") hereby amends Item 7 of its
Current Report on Form 8-K, filed July 3, 1997, relating to the June 19, 1997
completion of the tender offer for the shares of common stock, par value $1.00
per share, of Transitional Hospitals Corporation ("Transitional") (the
"Transitional Acquisition").
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
(i) The (i) consolidated audited balance sheet of Transitional as of
November 30, 1996 and (ii) the consolidated audited statements of
operations of Transitional for the fiscal years ended November 30,
1994, 1995 and 1996 have been filed with the Securities and Exchange
Commission (the "Commission") as part of Transitional's Annual Report
on Form 10-K (Comm. File No. 1-7008) for the fiscal year ended
November 30, 1996 and are incorporated herein by reference.
(ii) The (i) consolidated unaudited balance sheet of Transitional as of
February 28, 1997 and (ii) the consolidated unaudited statement of
income of Transitional for the three months ended February 28, 1997
have been filed with the Commission as part of Transitional's
Quarterly Report on Form 10-Q (Comm. File No. 1-7008) for the
quarterly period ended February 28, 1997 and are incorporated herein
by reference.
(iii) The (i) consolidated unaudited balance sheet of Transitional as of May
31, 1997 and (ii) the consolidated unaudited statement of operations
of Transitional for the three months ended May 31, 1997 have been
filed with the Commission as part of Transitional's Quarterly Report
on Form 10-Q (Comm. File No. 1-7008) for the quarterly period ended
May 31, 1997 and are incorporated herein by reference.
(b) Pro Forma Financial Information.
Pro forma financial information for the Company, including the unaudited pro
forma condensed combined statement of operations for the periods ended June 30,
1997 and December 31, 1996, the unaudited condensed consolidated balance sheet
at June 30, 1997 and the notes to unaudited pro forma condensed combined
financial statements, is filed herewith. The unaudited pro forma condensed
combined statement of operations gives effect to the following, as if each had
occurred on January 1, 1996:
(i) The acquisition of TheraTx, Incorporated ("TheraTx") (the "TheraTx
Merger") on March 21, 1997 as previously reported on the Current Report
on Form 8-K of the Registrant, dated March 18, 1997 and filed with the
Commission.
(ii) The May 12, 1997 repurchase of substantially all of the outstanding
TheraTx $100 million 8% Convertible Subordinated Notes Due 2002
assumed in connection with the TheraTx Merger.
(iii) The acquisition of Transitional, completed on June 24, 1997, is
included in the Company's historical condensed consolidated statement
of operations and condensed consolidated balance sheet from the date of
acquisition.
(iv) The related increase in borrowings under the Company's bank credit
facility (the "Credit Agreement") related to the TheraTx Merger and
the Transitional Acquisition.
No pro forma adjustments are required for the unaudited condensed consolidated
balance sheet at June 30, 1997 because the aforementioned events all occurred
prior to that date.
(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of June 18,
1997, among Vencor, Inc., LV Acquisition Corp. and
Transitional Hospitals Corporation.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse LLP.
99.1 Annual Report on Form 10-K of Transitional for the
fiscal year ended November 30, 1996 (Comm. File
No. 1-7008) is incorporated herein by reference.
99.2 Quarterly Report on Form 10-Q of Transitional for
the Quarterly Period ended February 28, 1997
(Comm. File No. 1-7008) is incorporated herein by
reference.
99.3 Quarterly Report on Form 10-Q of Transitional for
the Quarterly Period ended May 31, 1997 (Comm.
File No. 1-7008) is incorporated herein by
reference.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statement of operations
of the Company for the six months ended June 30, 1997 and the year ended
December 31, 1996, give effect to the TheraTx Merger, the repurchase of certain
TheraTx debt, the Transitional Acquisition, and the related increase in
borrowings under the Credit Agreement, as if such events had occurred on January
1, 1996. The unaudited condensed consolidated balance sheet of the combined
entity as of June 30, 1997 is also included herein.
These financial statements are for informational purposes only and are not
necessarily indicative of the results that would have been obtained had the
TheraTx Merger, the repurchase of certain TheraTx debt, the Transitional
Acquisition, and the related increase in borrowings under the Credit Agreement
occurred on January 1, 1996. The unaudited pro forma financial statements
should be read in conjunction with the respective historical audited
consolidated financial statements of the Company and TheraTx for the year ended
December 31, 1996 and Transitional for the year ended November 30, 1996.
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VENCOR, INC., THERATX, INCORPORATED AND TRANSITIONAL HOSPITALS CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THERATX TRANSITIONAL
VENCOR THERATX PRO FORMA TRANSITIONAL PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................... $1,458,991 $94,028 $ - $159,444 $(5,202)(d) $1,707,261
---------- ------- ------- -------- ------- ----------
Salaries, wages and benefits....... 846,379 56,926 - 79,976 (2,751)(d) 980,530
Supplies........................... 143,361 7,783 - 16,739 (562)(d) 167,321
Rent............................... 40,731 2,759 - 4,857 (165)(d) 48,182
Other operating expenses........... 228,721 13,073 - 39,963 (1,295)(d) 280,462
Depreciation and amortization...... 53,851 2,645 1,162 (a) 6,969 4,026 (a) 68,409
(244)(d)
Interest expense................... 31,334 3,108 4,461 (b) 606 23,271 (b) 62,161
(600)(b) (19)(d)
Investment income.................. (3,313) - - (2,971) 137 (d) (6,147)
---------- ------- ------- -------- ------- ----------
1,341,064 86,294 5,023 146,139 22,398 1,600,918
---------- ------- ------- -------- ------- ----------
Income from operations before
income taxes.................... 117,927 7,734 (5,023) 13,305 (27,600) 106,343
Provision for income tax........... 46,935 2,862 (1,915)(c) 5,189 (10,746)(c) 42,325
---------- ------- ------- -------- ------- ----------
Income from operations............. $ 70,992 $ 4,872 $(3,108) $ 8,116 $(16,854) $ 64,018
========== ======= ======= ======== ======== ==========
Earnings per common and common
equivalent share:
Income from operations:
Primary...................... $ 1.00 $ 0.91
Fully diluted................ $ 1.00 $ 0.90
Shares used in computing earnings
per common and common
equivalent share:
Primary...................... 70,678 70,678
Fully diluted................ 71,037 71,037
</TABLE>
See notes to unaudited pro forma
condensed combined financial statements.
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VENCOR, INC., THERATX, INCORPORATED AND TRANSITIONAL HOSPITALS CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THERATX TRANSITIONAL
VENCOR THERATX PRO FORMA TRANSITIONAL PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................... $2,577,783 $391,155 $ (915)(e) $507,194 $ - $3,475,217
---------- -------- -------- -------- -------- ----------
Salaries, wages and benefits....... 1,490,938 233,530 - 264,332 - 1,988,800
Supplies........................... 261,621 28,329 - 42,442 - 332,392
Rent............................... 77,795 11,146 - 9,016 - 97,957
Other operating expenses........... 405,797 58,033 (915)(e) 140,026 - 602,941
Depreciation and amortization...... 99,533 11,324 5,396 (a) 22,364 8,332 (a) 146,949
Interest expense................... 45,922 13,024 21,954 (b) 3,889 48,164 (b) 131,753
(1,200)(b)
Investment income.................. (12,203) (312) - - - (12,515)
Non-recurring transactions......... 125,200 - - 33,524 - 158,724
---------- -------- -------- -------- -------- ----------
2,494,603 355,074 25,235 515,593 56,496 3,447,001
---------- -------- -------- -------- -------- ----------
Income (loss) from operations
before income taxes............... 83,180 36,081 (26,150) (8,399) (56,496) 28,216
Provision for income tax........... 35,175 13,364 (8,136)(c) (3,047) (23,141)(c) 14,215
---------- -------- -------- -------- -------- ----------
Income (loss) from operations...... $ 48,005 $ 22,717 $(18,014) $ (5,352) $(33,355) $ 14,001
========== ======== ======== ======== ======== ==========
Earnings per common and common
equivalent share:
Income from operations:
Primary.......................... $ 0.68 $ 0.20
Fully diluted.................... $ 0.68 $ 0.20
Shares used in computing earnings
per common and common
equivalent share:
Primary.......................... 70,702 64 (f) 70,766
Fully diluted.................... 70,702 64 (f) 70,766
</TABLE>
See notes to unaudited pro forma
condensed combined financial statements.
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VENCOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30,
1997
----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 106,476
Accounts and notes receivable less allowance for loss of $52,687.. 639,889
Inventories....................................................... 36,525
Income taxes...................................................... 103,556
Other............................................................. 52,200
----------
938,646
Property and equipment, at cost.................................... 2,050,914
Accumulated depreciation........................................... (462,968)
----------
1,587,946
Intangible assets less accumulated amortization of $29,238......... 699,671
Investments in affiliates.......................................... 85,974
Other.............................................................. 97,820
----------
$3,410,057
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 146,427
Salaries, wages and other compensation............................ 153,304
Other accrued liabilities......................................... 132,631
Long-term debt due within one year................................ 24,747
----------
457,109
Long-term debt..................................................... 1,935,019
Deferred credits and other liabilities............................. 97,503
Minority interests in equity of consolidated entities.............. 42,839
Stockholders' equity:
Common stock, $.25 par value; authorized 180,000 shares;
issued 72,859 shares............................................. 18,215
Capital in excess of par value.................................... 724,294
Retained earnings................................................. 218,013
----------
960,522
Common treasury stock; 3,528 shares............................... (82,935)
----------
877,587
----------
$3,410,057
==========
</TABLE>
See notes to unaudited pro forma
condensed combined financial statements.
6
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VENCOR, INC., THERATX, INCORPORATED AND TRANSITIONAL HOSPITALS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The purchase method of accounting has been used in the preparation of the
unaudited pro forma condensed combined financial statements. Under this method
of accounting, the aggregate purchase price is allocated to assets acquired and
liabilities assumed based on their estimated fair values. Accordingly, the
excess of the purchase price over the fair value of net assets acquired has been
reflected as goodwill. The purchase price and estimated fair values of assets
and liabilities are preliminary and subject to change.
For purposes of the unaudited pro forma condensed combined financial
statements, the excess of the purchase price for the TheraTx Merger and the
Transitional Acquisition over fair value of the net assets acquired is being
amortized over 40 years using the straight-line method.
Pro forma income from operations for 1997 excludes $10.3 million of non-
recurring costs, in aggregate, incurred by both TheraTx and Transitional in
connection with the TheraTx Merger and the Transitional Acquisition,
respectively. A break-up fee of $19.4 million paid by Transitional in June 1997
in connection with the Transitional Acquisition is also excluded from pro forma
income from operations.
For the periods presented, unaudited pro forma financial data have been
derived by combining the historical financial data of Vencor and TheraTx (based
upon annual reporting periods ended December 31 and the six months ended June
30) and Transitional (based upon annual reporting periods ended November 30 and
the six months ended May 31).
Certain prior year historical TheraTx and Transitional amounts have been
reclassified to conform to the Company's presentation.
NOTE 2 -- PRO FORMA ADJUSTMENTS
The adjustments included in the unaudited pro forma condensed combined
financial statements follow (dollars in thousands):
(a) To adjust amortization expense:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
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<S> <C> <C>
THERATX MERGER:
Record amortization related to the excess of the purchase price
for TheraTx over net assets acquired.................................. $2,075 $ 8,300
Eliminate TheraTx historical amortization of the excess
of purchase price over net assets acquired............................ (738) (2,904)
Actual amortization recorded for the period March 21 through March 31.. (175) -
------ -------
$1,162 $ 5,396
====== =======
TRANSITIONAL ACQUISITION:
Record amortization related to the excess of the purchase price
for Transitional over net assets acquired............................. $4,166 $ 8,332
Actual amortization recorded for the period June 24 through June 30.... (140) -
------ -------
$4,026 $ 8,332
====== =======
</TABLE>
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VENCOR, INC., THERATX, INCORPORATED AND TRANSITIONAL HOSPITALS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- PRO FORMA ADJUSTMENTS (CONTINUED)
(b) To record additional interest expense related to the borrowings and
refinancings for the TheraTx Merger and the Transitional Acquisition:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
THERATX MERGER:
Interest expense related to acquisition debt......................... $ 5,632 $ 22,528
Eliminate interest expense related to TheraTx bank credit facility... (1,497) (4,510)
Interest on Credit Agreement replacing TheraTx bank credit facility.. 1,352 3,936
Actual interest recorded for the period March 18 through March 31.... (1,026) -
-------- --------
$ 4,461 $ 21,954
======== ========
Interest expense on refinanced convertible notes..................... $ 3,400 $ 6,800
Eliminate interest expense on convertible notes...................... (4,000) (8,000)
-------- --------
$ (600) $ (1,200)
======== ========
TRANSITIONAL ACQUISITION:
Interest expense related to acquisition debt......................... $ 21,816 $ 43,732
Interest expense on $2.0 billion Credit Agreement.................... 35,012 65,066
Eliminate interest expense on $1.75 billion Credit Agreement......... (32,790) (60,634)
Actual interest recorded for the period June 24 through June 30...... (767) -
-------- --------
$ 23,271 $ 48,164
======== ========
</TABLE>
(c) To adjust the provision for income taxes for the increase in the effective
tax rate of the Company as a result of the TheraTx Merger and the
Transitional Acquisition and to record the tax provision related to the pro
forma adjustments.
(d) To eliminate historical Transitional operations consolidated with the
Company for the period June 24, 1997 through June 30, 1997.
(e) To eliminate transactions between the Company and TheraTx.
(f) To adjust common equivalent shares to reflect the conversion of TheraTx
stock options into stock options of the Company.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VENCOR, INC.
Dated: August 11, 1997 /s/ W. Bruce Lunsford
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W. Bruce Lunsford
Chairman of the Board,
President and Chief
Executive Officer
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